Coronavirus Is Infecting Colorado's Budget, But The State Has Some Advantages
Colorado's economic forecast is growing increasingly gloomy as a record number of residents file for unemployment during the coronavirus pandemic. The state's ski areas and other major businesses remain closed. While lawmakers are staying away from a dark and empty Capitol building, they still need to write a budget before June 30.
"How can I find the words to express how challenging this is for budget writers at the moment?" said Barb Rosewicz, who studies state budgets for the Pew Charitable Trusts in Washington D.C. "They are keeping government running at a time they don't know how much money is coming in. And they know their costs are going up and they don't know how they are going to meet ends meet."
But Rosewicz says Colorado has a few advantages during the pandemic.
The state started the fiscal year with $1.1 billion in reserves. Rosewicz says that's enough money to run the government for 32 days if no other money was coming in.
Colorado's so-called "rainy day fund" is stronger than the national median. For example, New Jersey entered the year with only $400 million in its reserves, or enough to pay for less than four days of its government operations.
That's likely one reason New Jersey's governor has ordered a $1 billion spending freeze, while Colorado's budget writers are only trying to trim about $43 million in the next three months.
"The states that have reserves are in the best position to handle this," she said. 'That's what they're for. When there's an emergency they can pull those funds out of savings and bridge the gap. Not to say that it is enough to cover something that we're dealing with because we don't know the dimensions yet."
Colorado also entered the pandemic with one of the strongest economies in the nation.
"You had the third highest growth in tax revenue since your peak early in the great recession," Rosewicz said. "So you're coming into this in a pretty strong position. Reserves are going to be able to help you. The federal government is going to be able to come in and help bridge the gap."
Still, the state is not immune from the economic toll of the virus.
"Getting worse and worse"
Colorado House Speaker KC Becker, D- Boulder, said last week the state should have enough money to weather the outbreak through the end of this fiscal year, which ends June 30.
But she said lawmakers are looking at a $2-to-$3 billion deficit in next year's spending plan.
"Writing the next budget is going to be incredibly difficult," she said. "Every week the numbers keep getting worse. ... So when do we hit bottom? When does the economy get back on its feet? How long this lasts. Those are all unknowns."
Asked whether lawmakers are going to have to shelve some of their top priorities such as paid family leave and a public health insurance option, Becker suggested they could become victims of the virus.
"A lot of bills will have to wait another year and what those are exactly hasn't fully been decided," she said.
She said federal funding could help bridge the budget deficit next year. But finding billions of dollars worth of cuts is going to be a challenge.
Meanwhile, state economists are trying to find a silver lining amidst the negative financial headlines. Last month, Kate Watkins, the state's chief economist, told lawmakers she didn't think the coronavirus would be as devastating to Colorado's economy as the Great Recession.
"It is a temporary impact that we can bounce back from, not a systemic sort of structural thing that's impacting the economy at large," she said. "Just a temporary shock."
But Rosewicz says it's too early to compare the coronavirus pandemic to the country's last major recession.
"I just don't have any confidence in those predictions at the moment," she said. "I still think it's too early. We don't know how deep. And we don't know how long. The Great Recession was deep and it was long. It was 19-months long. But it's still too early to tell."